Black Tuesday

Black Tuesday is a term used to signify October 29, 1929, when the US stock market crashed. The Dow Jones Industrial Average (DJIA) reduced by almost 12% on this day. Furthermore, the black Tuesday date succeeded Black Monday (October 28, 1929) when the DJIA diminished by approximately 13%. 

The stock market did not restore its pre-crash heights till November 1954 (closing at 382.74). Moreover, the black Tuesday certainly indicated the dawn of the 10-year-long great depression that influenced all industrialized nations globally.  

Key Takeaways                                                               

• Black Tuesday refers to the biggest US stock market crash on October 29, 1929, when the DJIA declined by nearly 12%. 
• It succeeded Black Monday when the Dow reduced by almost 13%. Black Tuesday marked the beginning of the 10-year financial slump called the great depression. 
• The early 1920s was the golden period for the stock market until September 1929, when stock prices started declining abruptly. 
• Its effects incorporate surged unemployment rates, limited commercial affairs, danger to the manufacturing sector, decreased automobile investment, and banks running out of money. 

Black Tuesday, by definition, implies the unfortunate fall-down of the stock market by almost 12% in October 1929. The continued reduction caused DJIA to lose nearly half of its worth until mid-November. The Dow kept decreasing during the summer of 1932 and closed at the lowest value of the 20th century at 41.22 (89% below the peak). 

Economists and Federal Reserve leaders learned two crucial lessons from the stock market crash on Black Tuesday. First, the reserve and central banks must cautiously respond to the equity market. Secondly, they can diminish the damage by any future stock market crash by following their playbook developed in the fall of 1929. 

Moreover, here is how the events transpired:

1. 24 August 1921: DJIA commences the post-war advancement at 63.90 points. 
2. 22 August 1922: Dow peaks at 100 for the first time and closes the day at 100.75. 
3. 1922-1929: Dow increased 400%. 
4. 3 September 1929: DJIA touches the pre-crash high and closes at 381.17.
5. 24 October 1929: The onset of the stock market crash with the trading of chart-topping 13 million stocks, creating panic. Five banks discharge nearly $20 million individually for stock purchases and retrieval of confidence in the stock market. This works, and the Dow closes at 299.47. 
6. 25 October 1929: The late rally exists, and the DJIA closes at 301.22. 
7. 28 October 1929 (Black Monday): The rally ends, and panic selling continues with the Dow lessening nearly 40 points to close at 260.64. Investors received multiple margin calls from their brokers. 
8. 29 October 1929 (Black Tuesday): Dow drops additional 30 points and closes at 230.07 on trading $16 million in stocks. 

In 1929, stock rates had increased to the highest level owing to the period of affluence and extravagance in the US. As a result, the DJIA gained from 63 (August 1921) to 381 (September 1929). Numerous individuals presumed the extended market development, and therefore, investors borrowed cash for stock purchases.

The monetary flourishment led to prosperous families and the advancement of telephones, automobiles, and other technologies. Contrary to popular belief, realty values decreased throughout the late 1920s, causing the mitigation in the stock market. However, some fiscal experts still supported the buying of equities. 

The National City Bank President Charles E. Mitchell and an alliance of bankers prompted confidence restoration through publicly buying the stocks at high rates. Nonetheless, the attempt went in vain with continued panic selling by investors and the diminishing of share prices.  

Consequently, stock rates began to fall on the black Tuesday date, i.e., October 29, 1929. This compelled the masses to hurriedly sell their stock, exit the market, and drive down the rates. The menacing pattern accelerated “panic selling” until the stock market fell to the lowest spot. 

Moreover, the tightening of financial regulations is considered the major reason behind its occurrence. 

The dawn of black Tuesday brought a bad omen for financial markets resulting in the stock market crash and restricted commercial affairs. Moreover, it threatened the manufacturing and commerce sector and scared consumers of future investments. As a result, several banks lost all cash and thus, were coerced to close. 

Ordinary citizens lost their savings, were concerned about their bill payments and worried about employment. Additionally, the high unpredictability and fright lessened the purchases of automobiles and other big-ticket goods purchased with credit. 

Moreover, the black Tuesday led to the most severe event in financial history, known as the great depression. As a result, stockbrokers also started demanding additional margin calls from investors to cover their open position. The diminished market demand of companies like Ford Motors resulted in laid-off employees and decreased production.

Needlessly, the unemployment rate surged from 3% to about 25%, enhancing contraction and global economic collapse. The individuals fortunate enough to be employed worked only as part-time employees. During 1929-1933, the US cash supply declined by nearly 1/3rd but increased as rates and output enhanced. 

Throughout the relevant contraction phase between the period above, the actual output of the US decreased by almost 30%. Other aftereffects include a steep deflation (price reduction at an annual rate of 10%), plunging share market, extensive bank failures, and reckless bankruptcies.